Do I have to pay HST on an assignment of a pre-construction condo in Ontario?

The HST treatment of a condo assignment sale is one of the most important and commonly misunderstood issues in Ontario real estate. The Canada Revenue Agency's position is that the profit (or "assignment fee") received by the assignor is generally subject to HST as a taxable supply, treating the original buyer as a "builder" for GST/HST purposes when they sell for profit.

The HST implications differ depending on whether the assignor is an individual or a corporation, how many assignments they have done, and whether the original purchase was made with the intent to resell. If the CRA classifies the assignor as a builder or as someone who acquired the pre-construction unit primarily for resale, the assignment profit is fully taxable and the assignor must remit HST.

For the assignee, the HST new-housing rebate availability depends on whether they intend to use the unit as a primary residence and how the transaction is structured. The rebate application process for an assignment differs from a direct purchase from a builder.

Both parties — assignor and assignee — should consult an accountant and a real estate lawyer before completing an assignment transaction. The tax consequences can be significant and are highly fact-specific. CRA has audited assignment transactions aggressively in recent years.